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Understanding Different Types of Loans

When it comes to borrowing money, loans can be categorized in several ways. Here’s a breakdown of the most common types of loans you’ll encounter, along with resources available at Ajeru.net to help you manage them.

1. Amortized Loans: Fixed Payments Over Time

Amortized loans are those where you pay a consistent amount regularly until the loan is fully repaid. These loans include familiar options like mortgages, car loans, student loans, and personal loans. With each payment, you cover both the principal and interest, making it easier to budget.

2. Deferred Payment Loans: Single Lump Sum at Maturity

Unlike amortized loans, deferred payment loans require a single large payment at the end of the loan term. These are often seen in commercial or short-term loans. Balloon loans may have smaller periodic payments, but the majority of the principal and interest is due at maturity.

 3. Bonds: Predetermined Payment at Maturity

Bonds function differently from standard loans. They involve making a fixed payment at maturity. Bonds can be coupon bonds, which provide regular interest payments, or zero-coupon bonds, sold at a discount and redeemed for full value later.

 Loan Basics for Borrowers

Interest Rate: This is the cost of borrowing money, usually expressed as an Annual Percentage Rate (APR). Understanding how interest affects your loan is crucial. You can calculate the interest with our [Interest Calculator](#).

Compounding Frequency: This refers to how often interest is calculated on your loan. More frequent compounding can lead to higher overall payments. For details, use our [Compound Interest Calculator](#).

Loan Term: The duration of your loan affects your payment amounts and total interest paid. Longer terms usually mean lower monthly payments but more interest overall.